COLLECTOR OF CENTRAL EXCISE Vs. MAJESTIC AUTO LTD.

JUDGEMENT

(1.) RESPONDENT , manufacturer of two -wheeler motor vehicles falling under Chapter Heading 8711 of the Schedule to the Central Excise Tariff Act, 1985 was availing Modvat credit on inputs. The dispute in this appeal relates to the period from 6 -7 -1992 to 20 -7 -1992. Notice was issued to the respondent stating that Modvat credit was not available to the respondent for the reasons indicated in the notice and proposing reversal of the Modvat credit under Rule 57 -1 of the Central Excise Rules (for short, the Rules). The respondent resisted the notice. However, the Assistant Collector confirmed the demand except in regard to a minor portion. Collector (Appeals) set aside the order on the ground of limitation except in regard to a minor portion. Department being aggrieved by the finding that the bulk of the claim is barred by limitation has filed this appeal.

(2.) RULE 57 -1 of the Rules deals with recovery of credit wrongly availed of or utilised in an irregular manner. The rule as it existed prior to the amendment effective from 6 -10 -1988 enabled the proper officer, where credit of duty paid on inputs was taken wrongly, to disallow the credit taken leading to the consequence of adjustment in the credit account or current account of the amount so disallowed or cash recovery. Rule 57 -1, as it originally stood, did not contain a specific provision for issue of show cause notice. The amendment introduced to the Rule with effect from 6 -10 -1988 incorporated a specific provision for issue of show cause notice within six months from the date of such credit or five years from the date of such credit, as the case may be. The starting point of period of limitation was changed from the date of filing of RT 12 return by amendment effecting from 16 -3 -1995.

(3.) IT is the contention of the Department that both before 6 -10 -1988 and after 6 -10 -1988 the provisions in Section 11A of the Central Excise Act, 1944 (for short, the Act) should be read into Rule 57 -1 of the Rules and, therefor, the date from which the period of limitation is to be reckoned would be the date of filing of RT 12 return even in a case arising prior to 6 -10 -1988 and, therefore, the notice in the present case would not be barred by limitation as it was issued within six months from the date of filing of RT 12 return, though it was issued after the expiry of six months from the date of availing Modvat credit. The High Court of Gujarat in Torrent Laboratories Pvt. Ltd. v. Union of India, 1991 (55) E.L.T. 25 (Guj.) held to the contrary, making it clear that provision of Section 11A of the Act cannot be imported into the scheme of Rule 57 -1 of the Rules, but that principles of natural justice should be read into the Rule and therefore, the show case notice within a reasonable time -frame will be necessary.